AlacraBlog

Great Press for Alacra Pulse

Wednesday's launch of the Alacra Pulse Platform and Alacra Street Pulse was extremely well received.  Fred got everything kicked off early Wednesday morning with his flattering blog post.  It's great to have a board member for has almost 14,000 followers on twitter.  Later in the day we were picked up by TechCrunch and Techmeme.  We also got a great write-ups by Michelle Manafy at eContent, Gary Price at VIP, and Sam Huleatt at Leveraging Ideas.
Today we received a terrific Newsbreak write-up from Marydee Ojala of Information today and a review by Mike Mayhew at Integrity Research.
While I was not l surprised by the great product reviews we received, I was surprised by how powerful the Twitter effect was.  We had hundreds of re-tweets. 

We Have a Pulse

A couple of years ago at Web 2.0 in San Francisco I unexpectedly ran into one of Alacra’s long-standing investment banking clients.  We sat through some sessions together and then over a beer discussed the growing quantity of information on the web that wasn’t captured by the major information services.  We agreed that there was an abundance of valuable information – the problem was how to aggregate it and separate the few precious signals from the enormous amount of noise. 

Several months later I was in London and I met with one of this client’s colleagues and had the same conversation.  He thought the challenge was not only finding the information but presenting it in such a way that a banker might actually use it.  This was the beginning of a year of research and 6 months of developing the Alacra Pulse Platform, which is being released today.  Alacra Pulse finds, filters and packages web-based content that lets you quickly consume relevant, important information about a company.

Alacra Pulse has two parts. The underlying platform reads web-based RSS feeds – from newspapers, magazine, trade publication sites and blogs – and extracts information from each article or post.  We first extract or tag entities (companies) from each piece of content and then we look for business events such as an analyst comment, a bankruptcy filing, news or rumors of an M&A transaction, or a quote by a CEO.  On top of the platform sit a series of event-specific applications, which drive current awareness, competitive intelligence and idea generation for users.

In the year we’ve been thinking about this, a number of other companies have developed and released products in the same space.  Perhaps the most well-known was Monitor 110, whose failure was revealingly described in a blog post and a recent presentation at SIIA Previews by the CEO, Roger Ehrenberg.  Two established players in the space are SkyGrid and FirstRain and there’s a start-up called EventVestor.  These services all meet a market need, but by talking to our customers we understood we needed to do something different in terms of coverage, pricing model and, most importantly, integration into the products and services we already have on the desktops of our financial institution and professional service firm clients.

So what are we doing and why is it different?  

The first and most important difference is that we’re looking at fewer sources.  Right now we’re reading and analyzing about 2500 RSS feeds.  Sometimes less is more.  By reading fewer feeds that have been hand-selected by our editorial team, we have significantly reduced the noise while still delivering plenty of signals.  So rather than “boiling the ocean” which is very difficult to scale, we’re carefully vetting our sources and only adding feeds that we believe will add valuable signals.

Secondly, we changed the concept of what a signal is.  Rather than look for mentions of companies and then trying to determine sentiment or meaning, we’re looking for company mentions within a given context.  Each contextual event we target will be presented in a separate application.  The first contextual event, which we are releasing today, is an “analyst” comment and application is Street Pulse.  An analyst can be a sell-side research analyst, a rating agency analyst, an industry analyst, or a blogger with the credentials, experience and expertise that makes him or her, in Alacra’s view an opinion leader.  Subsequent events we will be finding and packaging will be companies in the context of an M&A transaction (Deal Pulse), distressed companies and restructurings (Weak Pulse), and mentions of law firms (Legal Pulse). 

Third, we knew our customers were not going to go to yet another place to consume this information.  So while there will be a free, advertising-supported version of each of the Pulse applications, the real value to our customers will be when we build this content into their Alacra-built portals, snapshots, public information books and current awareness services.

Finally, for Alacra Pulse Professional, we will have an attractive enterprise-wide pricing model.  There will be four pieces of functionality available on the professional version that will not be available on the free version:

• Users will be able to set up portfolios or watch lists of companies they want to follow.
• Once set up, Pulse Professional users will be able to get email and mobile updates of events on their portfolio companies. 
•  There will be a “sharing” function, where a user can quickly email an event to a colleague or a customer.
•  There will be an advanced search function that will allow researchers greater access to the Pulse database.

Perhaps the most exciting feature of the Pulse Platform is that we can offer it under a freemium business model.  All our other products have been behind a pay wall so it has always been hard to get feedback from users.  Given he changes in sell-side research and the growth of alternative media, I'm looking forward to having lots of people using and critiquing our products.

Watch This Space

Historically, Alacra has not released new products.  Instead, new products usually escape.  Not this time.  Later this week Alacra will be launching a new platform and a new product that we're all extremely excited about.  More on Wednesday.

Tweeting the Markopolos Hearing

Michelle Leder of Footnoted.org is doing a fantastic job tweeting the Harry Markopolos hearing on the failure of the SEC to catch Madoff. You can follow her at http://twitter.com/footnoted.

More On The Accelerating Demise Of Sell-Side Research

Two excellent bloggers opine on the changes in the sell-side research market:  Roger Ehrenberg of Information Arbitrage as part of a longer post titled Key Themes in Financial Services 2009-2010 wrote:

Once dominated by the sell-side, the majority of research consumed by the buy side will be sourced from third-party providers. Many if not most top sell-side research analysts will leave to set up their own shops, and leverage lightweight, flexible technologies for publishing and disseminating their research. They will likely leverage the services of third-party brokers to monetize their research through Commission Sharing Arrangements (CSAs). Further, "expert networks" will continue to proliferate, seeking to connect those with domain experience with those in need of deep, targeted insights. Gerson Lehrman Group (GLG), the 800-pound gorilla in the field, will continue to flourish, but the long tail of expertise not covered by their network will also become available. The key to accessing research in a fragmented landscape is the discovery layer, the matching of interests with knowledge. This will continue to be a "hot button" topic as investors work to become more efficient and streamline their investment process.

Can't argue with Roger's view, especially in light of the post by Mike Mayhew at Integrity Research called Grim Days Ahead for Analysts which, in addition to information on the sell-side excerpted below, contained a chart outlining recent job losses on both the buy-side.

According to various sources, Wall Street firms have announced 92,260 job cuts since October.  This includes 52,000 jobs or 15% of the workforce at Citigroup, 10% at JP Morgan Chase, Goldman Sachs, and Morgan Stanley, and a 6% reduction at State Street Corp.  In fact, the financial services industry has lost approximately 180,000 jobs - a total that is likely to exceed 200,000 when all is said and done.

These reductions have had impacted Wall Street research departments.  Last spring, JP Morgan Chase laid off a significant number of research staff after acquiring the Bear Stearns business.  In December of last year, the Bank of America started reducing the number of analysts on staff in the wake of the purchase of Merrill Lynch.  Merrill Lynch employed 109 senior equity research analysts while Bank of America employed 47 analysts before the reductions.

Recently, Deutsche Bank announced that it was discontinuing its corporate governance research, JP Morgan and Merrill Lynch moved to end its dedicated ESG research coverage, and Citigroup’s decided to cut back staff at its in-house SRI research team.

In fact, unofficial data collected by Integrity Research Associates suggests that the number of senior publishing analysts at sell-side investment banks and brokerage firms have declined close to 40% over the past twelve months.

Alacra has seen an increase in the number of buy-side accounts purchasing content from the Alacra Store (www.alacrastore.com), and a similar increase in the number of buy-side firms with access to Alacra Premium.  More traditional market research is being used as investment research and, somewhat surprisingly, credit research is being consumed as a substitute for equity research.  Just as the sell-side research arena is unrecognizable compared to this time last year, it will be similarly unrecognizable one year forward from what it is today.